Nokia has hired Microsoft's Stephen Elop as its new CEO. Can the Finnish
manufacturer recover ground lost to Apple and Google - and how bad are
things at the company anyway?

The biggest phone maker in the world is not Apple, despite all the media hype, and it’s certainly not Google, who have never manufactured a phone of their own. Now, as has been the case since 1998, it is Nokia. But on Friday the company finally ditched the man who had overseen the Finnish giant’s decline, which culminated in the announcement earlier this year that operating profits had crashed by 40 per cent.

Olli-Pekka Kalasvuo first joined Nokia in 1980, and rose to be Chief Executive Officer in 2007; Microsoft’s Stephen Elop replaces him, and the challenge, quite simply is to reassert Nokia’s place at the forefront of mobile phones.

A certain reality check, however, is necessary, before Nokia’s obituaries are written: not only does the company remain the largest mobile maker in the world, and also account for a third of the entire Helsinki stock exchange: it is also a major player in the emerging markets that will drive growth in the future. Nokia is fighting not Apple or HTC, but manufacturers little-known in the UK, such as ZTE, in emerging markets that include China and India. Its strategy is to present affordable, relatively unsophisticated handsets that its software turns into “one box solutions”. So a mobile sold in India might connect basic web services, messaging and phone calls in a way that the market has yet to see from other companies. It’s not only proving fairly successful, but it’s also a way of establishing Nokia as the company of choice for a new, untapped range of populations. It’s also what Apple have been doing in the West with their iPods and iPhones for years.

When it comes to Europe and the West, for that matter, such is Nokia’s relationship with mobile networks and retailers that their products sell impressive quantities nonetheless.

Even so, Nokia has suffered a catastrophic loss in what Ovum analyst Tony Cripps calls “mindshare”. At the top end, of the market, it has ceased to exist. Then company’s current flagship product is the N8, which is based on the decrepit Symbian 3 operating system. Although its features are genuinely impressive, from high definition video to dolby surround sound, and its design is rather satisfying, the phone’s interface remains a throwback to 2005. In mobile phone terms, that might as well be 1895.

The company’s forthcoming global summit, Nokia World, will be held in London this week, and Tim Berners-Lee, the inventor of the web, will deliver a keynote address. Stephen Elop does not officially start until later in the month, but he’s been recruited, Nokia’s chairman has already said, because of expertise in software and “change management”. Indeed, it is not for a slice of Microsoft’s track record in mobile phones that Nokia has hired Elop.

So the challenges the new man at the top will face are two fold, and possibly by some definitions conflicting, too. “In many respects they’re still doing as great job,” says Cripps. “But from a Western perspective they’re seen to be a trailing.” That means Elop must manage sales of massive volumes to burgeoning developing markets, while also concentrating on the new handsets that are likely to be unveiled in London, based on a new operating system called Meego. It may yet provide the revolution Nokia needs; but by the end of October Microsoft’s new phone operating system will be with consumers, too. That would mean software developers, the people who will make the programmes that define how a global population interacts with mobile phones, will have to choose between Google, Apple, Microsoft and Meego. It seems unlikely that all four will survive.